UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (date of earliest event reported): April 12, 2019

 

HealthLynked Corp.
(Exact Name of Registrant as Specified in its Charter)

 

Nevada   47-1634127
(State of Incorporation)   (I.R.S. Employer Identification No.)
     
1726 Medical Blvd., Suite 101, Naples, Florida   34110
(Address of Principal Executive Offices)   (ZIP Code)

 

(239) 513-1992

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).  ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

Item 1.01 Entry Into A Material Definitive Agreement    

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

As previously reported on a Current Report on Form 8-K, dated January 15, 2019, HealthLynked Corp. (the “ Corporation ”) entered into that certain Agreement and Plan of Merger (the “ Merger Agreement ”) by and among the Corporation, HLYK Florida, LLC, a Florida limited liability company and wholly-owned subsidiary of the Corporation (“ HLYK FL ”), Hughes Center for Functional Medicine, P.A. (the “ Target ” or “ HCFM ”), and Pamela A. Hughes, D.O. (the “ Seller ,” together with the Corporation, HLYK FL, and the Target, the “ Parties ”).

 

On April 12, 2019, the Parties entered into a First Amendment to Agreement and Plan of Merger, which amended certain sections of the Merger Agreement (the “ Amendment ,” together with the Merger Agreement, the “ Transaction Documents ”). The Amendment revises the Merger Consideration (as that term is defined in the Merger Agreement) payable to the Seller at Closing to the following: (i) $500,000 in cash; and (ii) 3,968,254 shares of the Corporation’s common stock.

 

Also on April 12, 2019, the closing of the transactions contemplated by the Transaction Documents (the “ Closing ”) took place, upon which the Target merged with and into HLYK FL, with HLYK FL as the surviving entity.

 

At the Effective Time set forth in the Transaction Documents: (i) the Seller received the Merger Consideration due at the Closing; (ii) articles of merger were filed with the Florida Department of State, Division of Corporations; (iii) all of the equity of the Target issued and outstanding immediately prior to the Effective Time was cancelled; (iv) HLYK FL is continuing as the surviving entity; and (v) HLYK FL remains a wholly-owned subsidiary of the Corporation.

 

Additionally, as a part of the Merger Consideration, the Seller is entitled to: (i) “earn-out” payments in the aggregate amount of $500,000 to be paid over three (3) years, subject to certain revenue and profit targets; (ii) Target cash balances in excess of $35,000 at the Closing, and (iii) any excess over the Minimum Value of $65,000 of the required medical supply inventory of the Target immediately prior to the Closing. If the Minimum Value was below $65,000 at Closing, the difference would have been paid by the Seller. No adjustments were made pursuant to this clause.

 

The foregoing description of the Transaction Documents does not purport to be complete and is qualified in its entirety by reference to the full text of the Transaction Documents, which are attached as exhibits to this Current Report on Form 8-K and are incorporated herein by reference. Capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Transaction Documents.

 

Item 8.01 Other Events

 

On April 16, 2019, the Corporation issued a press release announcing the Closing of the Merger Agreement.

 

Pursuant to Regulation G, the information below is a reconciliation of certain non-GAAP financial measures used in the press released filed herewith to the most directly comparable GAAP financial measure. Net income is the most direct comparable GAAP financial measure for EBITDA (earnings before interest, tax, depreciation, and amortization), a non-GAAP financial measure.

 

    Years Ended December 31,  
    2018     2017  
             
HCFM net income   $ 290,955     $ 257,258  
Depreciation and amortization     72,688       53,764  
Interest expense     9,278       421  
HCFM EBITDA as reported in April 16, 2019 press release   $ 372,921     $ 311,443  

 

A copy of the press release is filed as Exhibit 99.1 to, and incorporated by reference in this Current Report on Form 8-K. The information in this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act, except as shall be expressly set forth by specific reference in any such filing.

 

1

 

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired . As a result of its acquisition of the Target as described in Item 2.01, the registrant is filing herewith the Target’s audited financial statements as of December 31, 2018, and 2017 as Exhibit 99.2 to this Current Report on Form 8-K.

 

(b) Pro Forma Financial Information . The pro forma financial information required by this item is filed as Exhibit 99.3 to this Form 8-K/A.

 

(d)  Exhibits .

 

Exhibit No.   Description
     
10.1   First Amendment to Agreement and Plan of Merger, dated April 12, 2019, by and among HealthLynked Corp., HLYK Florida, LLC, Hughes Center for Functional Medicine, P.A., and Pamela A. Hughes, D.O.
99.1   Press Release, dated April 16, 2019
99.2   Audited Consolidated Financial Statements of Hughes Center for Functional Medicine, P.A. for the years ended December 31, 2018 and 2017
99.3   Unaudited pro forma combined financial information of HealthLynked Corp. and Hughes Center for Functional Medicine, P.A.

 

2

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  HEALTHLYNKED CORP.
   
Dated: April 18, 2019 /s/ George O’Leary
  George O’Leary
  Chief Financial Officer

 

 

3

 

 

Exhibit 10.1

 

FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER

 

THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the “ Amendment ”) is made and entered into as of April 12, 2019 (the “ Effective Date ”), by and between HealthLynked Corp., a Nevada corporation (the “ Parent ”), HLYK Florida, LLC, a Florida limited liability company (the “ Company ”), Hughes Center for Functional Medicine, P.A. (the “ Target ”), and Pamela A. Hughes, D.O. (the “ Seller ”).

 

WHEREAS, Parent, Company, Target, and Seller are parties to an Agreement and Plan of Merger, dated January 15, 2019 (the “ Agreement ”) pursuant to which the parties intend to effect a merger of Target with and into Company, upon which time Target will cease to exist and Company will continue as the survive entity and wholly owned subsidiary of Parent; and

 

WHEREAS, the parties have agreed to amend the terms of the Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the promises and mutual agreements contained herein, the parties do hereby agree as follows:

 

1. Sections 5.1 and 5.2 of the Agreement shall be and are hereby deleted in its entirety and replaced with the following:

 

5.1. $500,000 payable at the Closing, as defined below;

 

5.2. 3,968,254 common shares of Parent with an aggregate value of $1,000,000 (valued at $0.252 per common share) shall be issued to the Seller at the Closing;

 

2. Except as otherwise expressly provided herein, all other terms and conditions of the Agreement shall remain unchanged and shall continue to be in full force and effect, and the terms of this Amendment shall be deemed a part of the Agreement as if fully set forth therein. To the extent any provision of this Amendment is inconsistent or shall conflict with any provision in the Agreement, the terms of this Amendment shall prevail.

 

3. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. Transmission of images of signed signature pages by facsimile, e-mail, or other electronic means shall have the same effect as the delivery of manually signed documents in person.

 

SIGNATURE PAGE FOLLOWS

 

 

 

 

IN WITNESS WHEREOF , the parties hereto have executed this Amendment as of the Effective Date.

 

COMPANY:   SELLER:
       
HLYK FLORIDA, LLC   PAMELA A. HUGHES, D.O.
       
By: /s/ George O’Leary   /s/ Pamela A. Hughes D.O.
Name: George O’Leary   Pamela A. Hughes, D.O., individually
Title: CFO    

 

PARENT:   TARGET:
         
HEALTHLYNKED CORP.   HUGHES CENTER FOR FUNCTIONAL MEDICINE, P.A.
         
By: /s/ George O’Leary   By: /s/ Pamela A. Hughes D.O.
Name: George O’Leary   Name: Pamela A. Hughes D.O.
Title : CFO   Title : Physician/Owner

 

 

  2

 

 

Exhibit 99.1

 

NAPLES, Fla., April 16, 2019 (GLOBE NEWSWIRE) -- HealthLynked Corp (OTCQB: HLYK) (the Company),  a leader in digital healthcare technology, announced today that it closed its acquisition of Hughes Center for Functional Medicine, P.A. (HCFM) on April 12, 2019.

 

HCFM, a private entity, is a leader in functional medicine focusing on Neurodegenerative diseases such as Alzheimer’s, Parkinson’s and Multiple Sclerosis. HCFM provides cutting-edge treatments to improve health and slow aging, including hormones, thyroid, weight loss, wellness and prevention. HCFM’s income streams are derived from patient office visits, a dedicated IV room, hyperbaric oxygen chambers, ozone, UVlrx, and the sale of supplements. DNA sequence testing has recently been added to its suite of services.

 

“Closing the acquisition of HCFM demonstrates HealthLynked’s forward-looking strategy of adding business assets that not only strengthen the company’s position in the marketplace but also offer greater services for our patient constituents,” said Michael Dent, M.D., HealthLynked’s Chairman and CEO. The Hughes Center is now the Naples Center for Functional Medicine, a HealthLynked Company (NCFM) and is a welcome addition to the Company’s health service division.

 

Audited Financials.  HCFM’s revenue for 2018 and 2017 were $3,023,344 and $2,696,245 respectively.  HCFM’s EBITDA for the same periods were $372,921 and $311,443 respectively. Anticipated NCFM EBITDA for the next twelve months, factoring out 2018 owners expenses, is projected to be approximately $450,000.  Assets of HCFM on December 31, 2018 were $436,349.

 

Amendment to the Agreement. HLYK and HCFM mutually agreed to amend the definitive agreement at closing to include $500,000 cash and $1,000,000 in HLYK Stock at $0.252/share. The $500,000 earn-out remained intact.

 

George O’Leary, Chief Financial Officer of HealthLynked, stated, “Dr. Hughes and I agreed that with her continued participation at the holding company level, it made more sense to align our interests with more stock in the transaction.” He continued, “We are very excited to bring Dr. Carol Roberts, Dr. Eduardo Maristany, and Dr. Pamela Hughes into the HLYK Family. JoAnn Rucker, our Regional Director of Practice Management, will be overseeing the transition.”

 

About HealthLynked Corp.

 

HealthLynked Corp. provides a solution for both patient members and providers to improve healthcare through the efficient exchange of medical information. The HealthLynked Network is a cloud-based platform that allows members to connect with their healthcare providers and take more control of their healthcare. Members enter their medical information, including medications, allergies, past surgeries and personal health records, in one convenient online and secure location, free of charge.

 

Participating healthcare providers can connect with their current and future patients through the system. Other benefits to providers include the ability to utilize the HealthLynked patent pending patient access hub “PAH” for patient analytics and its marketing tools to connect with their active and inactive patients to improve patient retention, access more accurate and current patient information, provide more efficient online scheduling and to fill last minute cancellations using our “real time appointment scheduling” all within our mobile application. Healthcare providers pay a monthly fee to access these HealthLynked services.

 

For additional information about HealthLynked Corp. visit www.healthlynked.com and connect with HealthLynked on Twitter , Facebook , and LinkedIn .

 

Forward Looking Statements

 

Forward-Looking Statements in this press release, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Our actual results, including as a result of any acquisitions, performance or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by our management, and us are inherently uncertain. We caution you not to place undue reliance on any forward-looking statements, which are made as of the date of this press release. We undertake no obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Certain risks and uncertainties applicable to our operations and us are described in the “ Risk Factors ” section of our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q and in other reports we have filed with the U.S. Securities and Exchange Commission. These reports are available at  www.sec.gov .

Exhibit 99.2

 

 

 

 

 

 

 

Hughes center for functional medicine Pa

 

 

 

Audited Financial Statements

 

For the Years Ended December 31, 2018 and 2017

 

 

 

 

 

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

TABLE OF CONTENTS

 

Independent Auditor’s Report 1
   
Financial Statements  
   
Balance Sheets as of December 31, 2018 and 2017 2
   
Statements of Income and Retained Earnings as of December 31, 2018 and 2017 3
   
Statements of Cash Flows as of December 31, 2018 and 2017 4
   
Notes to Financial Statements 5-7

 

i

 

 

  805 Third Avenue
Suite 1430
New York, NY 10022
212.868.3669
212.838.2676 / Fax
www.rbsmllp.com

 

INDEPENDENT AUDITOR’S REPORT

 

To the Board of Directors and Stockholders
of Hughes Center for Functional Medicine PA

 

We have audited the accompanying financial statements of Hughes Center for Functional Medicine PA (the “Company”), a Florida S-corporation, which comprise the balance sheets as of December 31, 2018 and 2017, and the related statements of income and retained earnings, and cash flows for the years then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hughes Center for Functional Medicine PA as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

 

New York, NY

April 10, 2019

 

 

New York | Washington, DC | California | Nevada | China | India | Greece

Member of ANTEA International with offices worldwide

 

1

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

BALANCE SHEETS

 

December 31, 2018 and 2017

 

    2018     2017  
ASSETS            
Current Assets:            
Cash   $ 83,223     $ 112,705  
Inventory     83,371       103,852  
                 
Total Current Assets     166,594       216,557  
                 
Furniture and Equipment     413,671       399,314  
Less: Accumulated Depreciation     (149,229 )     (80,642 )
                 
Net Furniture and Equipment     264,442       318,672  
                 
Other Assets:                
Security deposit     5,194       5,194  
Loan costs net     119       2,291  
                 
Total Other Assets     5,313       7,485  
                 
Total Assets   $ 436,349     $ 542,714  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
Current Liabilities:                
Accounts payable   $ 38,060     $ 52,796  
Accrued payroll liabilities     16,213       12,774  
Line of credit     -       214,000  
                 
Total Current Liabilities     54,273       279,570  
Total Liabilities     54,273       279,570  
                 
Stockholders’ Equity:                
Common stock-100 shares authorized no par value; Issued and outstanding 100 and 100 shares in 2018 and 2017, respectively     -       -  
Additional paid in capital     1,000       1,000  
Retained Earnings     381,076       262,144  
                 
Total Stockholders’ Equity     382,076       263,144  
                 
Total Liabilities and Stockholders’ Equity   $ 436,349     $ 542,714  

 

See accompanying independent auditor’s report and notes to financial statements

 

2

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

STATEMENTS OF INCOME AND RETAINED EARNINGS

 

Years Ended December 31, 2018 and 2017

 

    2018     2017  
             
Revenue   $ 3,023,344     $ 2,686,245  
                 
Cost of Services     1,092,187       970,446  
                 
Gross Profit     1,931,157       1,715,799  
                 
Operating Expenses:                
                 
Salaries and wages     671,743       621,587  
Contract/purchased services     412,372       360,328  
Fringe benefits and payroll taxes     132,696       132,790  
Rent     106,202       98,682  
Depreciation and amortization     72,688       53,764  
Advertising and promotion     87,207       53,905  
Insurance     11,145       17,715  
Telephone     11,946       9,868  
Dues and subscriptions     9,557       4,038  
Records storage     7,030       7,824  
Professional fees     22,389       8,165  
Repairs and maintenance     20,153       16,223  
Postage and shipping     20,573       17,713  
Office expense     34,030       41,902  
Other operating expense     11,193       13,616  
                 
Total operating expenses     1,630,924       1,458,120  
                 
Income From Operations     300,233       257,679  
                 
Other Income (Expense):                
Interest expense     (9,278 )     (421 )
                 
Total other (expense)     (9,278 )     (421 )
                 
Net Income     290,955       257,258  
                 
Retained Earnings At Beginning Of Year     262,144       215,298  
                 
Distributions     (172,023 )     (210,412 )
                 
Retained Earnings At End Of Year   $ 381,076     $ 262,144  

 

See accompanying independent auditor’s report and notes to financial statements

 

3

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

STATEMENTS OF CASH FLOWS

 

Years Ended December 31, 2018 and 2017

 

    2018     2017  
             
CASH FLOWS FROM OPERATING ACTIVITIES            
             
Net Income   $ 290,955     $ 257,258  
                 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization expense     72,688       53,764  
Changes in operating assets and liabilities:                
Inventory     20,481       (15,122 )
Other assets     (1,929 )     -  
Accounts payable     (14,736 )     3,256  
Accrued payroll liabilities     3,439       (250 )
                 
NET CASH PROVIDED BY OPERATING ACTIVITIES     370,898       298,906  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
                 
Equipment acquisitions     (14,357 )     (227,633 )
                 
NET CASH USED IN INVESTING ACTIVITIES     (14,357 )     (227,633 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
                 
Borrowing on line of credit     -       224,000  
Repayments on line of credit     (214,000 )     (60,332 )
Distributions to shareholder     (172,023 )     (210,412 )
                 
NET CASH USED IN FINANCING ACTIVITIES     (386,023 )     (46,744 )
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (29,482 )     24,529  
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR     112,705       88,176  
                 
CASH AND CASH EQUIVALENTS AT END OF YEAR   $ 83,223     $ 112,705  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                
                 
Cash paid during the year for:                
Interest   $ 9,278     $ 421  

 

See accompanying independent auditor’s report and notes to financial statements

 

4

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

NOTES TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2018 AND 2017

 

Note 1. DESCRIPTION OF COMPANY

 

The Company is a Functional Medical Practice and Professional Association organized under the laws of the State of Florida and is engaged in improving the health of its patients through individualized and integrative health care. Led by Pamela Hughes, DO, ABFM, ABAARM, the Company specializes in treating chronic diseases and helping patients to proactively maintain their long-term health. This is accomplished by exploring the root cause of their condition and partnering with them to shape a customized treatment path to achieve wellness and improved quality of life.

 

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America, except where otherwise noted.

 

Revenue Recognition

 

Revenues are recognized when earned and expenditures are recognized when incurred. Amounts billed to patients are collected when services are rendered. The Company does not carry accounts receivable and does not accept insurance.

 

Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company presents its statement of cash flows using the indirect method. For purposes of the statement of cash flows, cash includes cash in checking, merchant and savings accounts.

 

Inventory

 

Inventory consisting of supplements, is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory is directly charged to cost of goods sold.

 

Furniture and Equipment

 

Equipment is stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from 5 to 7 years. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.

 

Impairment of Long-Lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash

 

5

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

NOTES TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2018 AND 2017

 

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

flows or appraised values, depending on the nature of the assets. As of December 31, 2018 and 2017, there were no impairment losses recognized for long lived assets.

 

Advertising and Promotion

 

The Company expenses all advertising costs as they are incurred. Total advertising expenses were $87,207 and $53,905 for the years ended December 31, 2018 and 2017, respectively.

 

Shipping Costs

 

The Company records shipping costs billed to its patients in revenue. Shipping costs recorded in revenue for the years ended December 31, 2018 and 2017 totaled $9,476 and $8,979, respectively.

 

Income Taxes

 

Federal income taxes have not been provided because the Company has elected, by consent of its stockholder, to be treated as an S Corporation for federal income tax purposes as provided in Section 1362(a) of the Internal Revenue Code.

 

The Company’s income or loss and credits are passed through to the stockholder and combined with other personal income and deductions to determine taxable income on the individual tax returns.

 

In accordance with generally accepted accounting principles, the Company accounts for uncertainty in income taxes by recognizing tax positions in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities.

 

As of December 31, 2018 and 2017, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31, 2018 and 2017, no interest or penalties were incurred.

 

Note 3. INVENTORIES

 

Inventories consist of supplements private labeled under Dr. Hughes brand. The carrying value of Inventory stock at December 31, 2018 and 2017 was $83,371 and $103,852, respectively.

 

Note 4. FURNITURE AND EQUIPMENT

 

    December 31, 2018     December 31, 2017  
Assets:            
Computer equipment & software   $ 49,809     $ 39,582  
Medical equipment     305,174       301,044  
Office furniture & equipment     58,688       58,688  
      413,671       399,314  
Accumulated Depreciation:                
Computer equipment & software     30,069       21,770  
Medical equipment     87,720       35,816  
Office furniture & equipment     31,440       23,056  
      149,229       80,642  
Furniture & Equipment Net   $ 264,442     $ 318,672  

 

6

 

 

HUGHES CENTER FOR FUNCTIONAL MEDICINE PA

 

(an S Corporation)

 

NOTES TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2018 AND 2017

 

Note 5. LINE OF CREDIT

 

The Company has a line of credit agreement with a bank of $325,000. Borrowings against the line at December 31, 2018 and 2017 were $-0- and $214,000, respectively. The line of credit bears interest of 5.75%. The line is reviewed annually and is due on demand. Under terms of the line of credit, the Company is required to maintain its operating accounts at the issuing bank. Interest expense for the twelve months ended December 31, 2018 and 2017 was $9,278 and $421, respectively.

 

Note 6. COMMITMENTS AND CONTINGENCIES

 

The Company leases its office space. The lease was executed on February 23, 2015 for the three-year period commencing March 1, 2015 and terminating February 28, 2018. The Company executed an extension agreement on March 1, 2018 for a period of one-year terminating on February 28, 2019. In addition to minimum monthly rent, the Company is also responsible for common area maintenance costs, which are estimated to be approximately $44,000 and $36,000 annually for the years ended December 31, 2018 and 2017, respectively. Pursuant to the original lease agreement, the Company made a security deposit with the landlord in the amount of $5,194.

 

U.S. GAAP requires that rent expense be recognized evenly on a straight-line basis over the lease term. The Company recognizes actual amounts paid as an expense in the year payment is made. The overall effect of this departure is immaterial to the Company’s financial statements for the years ending December 31, 2018 and 2017, respectively. Total rent expense for the years ending December 31, 2018 and 2017 was $106,202 and $98,682, respectively.

 

Future minimum rent payments under the terms of the lease extension agreement are:

 

Year Ended December 31,   Amount  
2019   $ 11,014  

 

Note 7. CONCENTRATION OF CREDIT RISK

 

Cash Balances

 

The Company maintains cash balances in one checking account and one money market account at a single financial institution. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to a combined total of $250,000; at times, the cash in this institution may exceed FDIC insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any significant credit risk on these cash balances.

 

Purchases and Accounts Payable

 

For the years ending December 31, 2018 and 2017, one vendor individually provided supplement inventory in excess of 10% of the Company’s total purchases. Purchases from this vendor amounted to $301,094 and $311,812 for 2018 and 2017, respectively. The Company had no accounts payable to this vendor at December 31, 2018 and 2017 and the supplies are readily available from other vendors.

 

Note 8. SUBSEQUENT EVENTS:

 

The Company has evaluated subsequent events through April 5, 2019, which is the date the financial statements were available to be issued.

 

On April 5, 2019, the Company entered in to a three-year agreement on its building lease. Minimum monthly lease payments under the new agreement are as follows:

 

Year ending December 31, 2019   $ 47,335  
Year ending December 31, 2120     68,237  
Year ending December 31, 2021     70,283  
Year ending December 31, 2022     20,675  

 

On January 15, 2019, the Company entered into a definitive agreement to be acquired by HealthLynked Corp. (OTCQB:HLYK)(“HealthLynked”) for $750,000 in cash, $750,000 in shares of HealthLynked common stock and $500,000 in a three-year performance-based payout.

 

 

7

 

Exhibit 99.3

 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Basis of presentation

 

The following unaudited pro forma combined balance sheet and statements of income are presented to give effect to the acquisition of Hughes Center for Functional Medicine, P.A. (“HCFM”) by HealthLynked Corp (“HealthLynked”). The pro forma information was prepared based on the historical financial statements and related notes of HealthLynked and HCFM, as adjusted for the pro forma impact of applying the acquisition method of accounting in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). The pro forma adjustments are based upon available information and assumptions that HealthLynked believes are reasonable. The allocation of the purchase price of the HCFM acquisition reflected in these unaudited pro forma combined financial statements has been based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. The pro forma adjustments are therefore preliminary and have been prepared to illustrate the estimated effect of the acquisition.

 

The unaudited pro forma combined balance sheet has been prepared to reflect the transaction as if the transaction had occurred on December 31, 2018. The unaudited pro forma combined statement of income combines the results of operations of HealthLynked and HCFM for the fiscal year ended December 31, 2018, as if the transaction had occurred on January 1, 2018.

 

The unaudited pro forma combined financial statements were prepared using the acquisition method of accounting with HealthLynked treated as the acquiring entity. Accordingly, the aggregate value of the consideration paid by HealthLynked to complete the acquisition was allocated to the assets acquired and liabilities assumed from HCFM based upon their estimated fair values on the closing date of the acquisition. HealthLynked has not completed the detailed valuations necessary to estimate the fair value of the assets acquired and the liabilities assumed from HCFM and the related allocations of purchase price, nor has HealthLynked identified all adjustments necessary to conform HCFM’s accounting policies to HealthLynked’s accounting policies. Additionally, a final determination of the fair value of assets acquired and liabilities assumed from HCFM will be based on the actual net tangible and intangible assets and liabilities of HCFM that existed as of the closing date. Accordingly, the pro forma purchase price adjustments presented herein are preliminary, and may not reflect any final purchase price adjustments made. HealthLynked estimated the fair value of HCFM’s assets and liabilities based on discussions with HCFM’s management, due diligence and preliminary work performed by third-party valuation specialists. As the final valuations are being performed, increases or decreases in the fair value of relevant balance sheet amounts will result in adjustments, which may result in material differences from the information presented herein.

 

1

 

 

HealthLynked Corp.

Unaudited Pro Forma Balance Sheets

As of December 31, 2018

 

                Pro Forma     Pro Forma  
    HealthLynked     HCFM     Adjustments     Consolidated  
ASSETS                        
Current Assets                        
Cash   $ 135,778     $ 83,223     $ (88,954 ) (1)   $ 130,047  
Accounts receivable, net     114,884                       114,884  
Prepaid expenses     28,542                       28,542  
Inventory             83,371               83,371  
Deferred offering costs     96,022                       96,022  
Total Current Assets     375,226       166,594       (88,954 )     452,866  
                                 
Property, plant and equipment, net     42,597       264,442               307,039  
Deposits and other long term assets     9,540       5,313               14,853  
Goodwill and other intangible assets                     1,590,146 (2)     1,590,146  
                                 
Total Assets   $ 427,363     $ 436,349     $ 1,501,192     $ 2,364,904  
                                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                                
                                 
Current Liabilities                                
Accounts payable and accrued expenses   $ 394,333     $ 54,273     $ 500,000 (3)   $ 948,606  
Capital lease, current portion     19,877                       19,877  
Due to related party, current portion     429,717                       429,717  
Notes payable to related party, current portion     672,471                       672,471  
Convertible notes payable, net of original issue discount     1,042,314                   (4)     1,042,314  
Derivative financial instruments     800,440               331,830 (4)     1,132,270  
Total Current Liabilities     3,359,152       54,273       831,830       4,245,255  
                                 
Long-Term Liabilities                                
Capital leases, long-term portion     3,058                       3,058  
                                 
Total Liabilities     3,362,210       54,273       831,830       4,248,313  
                                 
Shareholders’ Deficit                                
Common stock     8,518               459 (5)     8,977  
Common stock issuable     26,137                       26,137  
Additional paid-in capital     7,531,553       1,000       1,094,309 (6)     8,626,862  
Retained earnings (accumulated deficit)     (10,501,055 )     381,076       (425,406 ) (7)     (10,545,385 )
Total Shareholders’ Deficit     (2,934,847 )     382,076       669,362       (1,883,409 )
                                 
Total Liabilities and Shareholders’ Deficit   $ 427,363     $ 436,349     $ 1,501,192     $ 2,364,904  

 

2

 

 

HealthLynked Corp.

Unaudited Pro Forma Statement of Operations

For the Year Ended December 31, 2018

 

                Pro Forma     Pro Forma  
    HealthLynked     HCFM     Adjustments     Consolidated  
Revenue                        
Revenue   $ 2,259,002     $ 3,023,344     $             $ 5,282,346  
Cost of services             1,092,187               1,092,187  
Gross profit     2,259,002       1,931,157               4,190,159  
                                 
Operating Expenses                                
Salaries and benefits     2,366,582       671,743               3,038,325  
General and administrative     2,840,784       886,493               3,727,277  
Depreciation and amortization     23,782       72,688               96,470  
Total Operating Expenses     5,231,148       1,630,924               6,862,072  
                                 
Loss from operations     (2,972,146 )     300,233               (2,671,913 )
                                 
Other Income (Expenses)                                
Loss on extinguishment of debt     (393,123 )                     (393,123 )
Change in fair value of debt     (140,789 )                     (140,789 )
Financing cost     (1,221,911 )             (44,330 ) (1)     (1,266,241 )
Amortization of original issue and debt discounts on notes payable and convertible notes     (763,616 )                     (763,616 )
Change in fair value of derivative financial instrument     (106,141 )                     (106,141 )
Interest expense     (193,109 )     (9,278 )             (202,387 )
Total other expenses     (2,818,689 )     (9,278 )     (44,330 )     (2,872,297 )
                                 
Net loss before provision for income taxes     (5,790,835 )     290,955       (44,330 )     (5,544,210 )
                                 
Provision for income taxes     ---                       ---  
                                 
Net loss   $ (5,790,835 )   $ 290,955     $ (44,330 )   $ (5,544,210 )
                                 
Net loss per share, basic and diluted:                                
Basic   $ (0.07 )                   $ (0.07 )
Fully diluted   $ (0.07 )                   $ (0.07 )
                                 
Weighted average number of common shares:                                
Basic     78,816,272               617,953 (2)     79,434,225  
Fully diluted     78,816,272               617,953 (2)     79,434,225  

 

3

 

 

HealthLynked Corp.

Notes to Unaudited Pro Forma Combined Financial Information

 

Note 1 – Purchase Price Consideration

 

The table below represents the total purchase price consideration:

 

Cash consideration           $ 500,000  
                 
Stock consideration                
Number of shares     3,968,254          
Closing share price on closing date (April 12, 2019)   $ 0.245     $ 972,222  
                 
Contingent Consideration                
Cash payment based on HCFM meeting 2019 revenue and profit targets   $ 100,000          
Cash payment based on HCFM meeting 2020 revenue and profit targets   $ 200,000          
Cash payment based on HCFM meeting 2021 revenue and profit targets   $ 200,000     $ 500,000  
                 
Total consideration     s     $ 1,972,222  

 

Note 2 – Pro Forma Adjustments

 

Following is a description of the unaudited pro forma adjustments reflected in the unaudited pro forma combined financial statements.

 

Adjustments to the pro forma combined balance sheet

 

(1) The pro forma adjustments to cash reflects the cash paid for the acquisition as follows:

 

Cash portion of purchase consideration   $ (500,000 )
Proceeds from convertible notes payable     300,000  
Proceeds from April 2019 Stock Sale     111,046  
Total   $ (88,954 )

 

During April 2019, HealthLynked entered into two separate convertible note instruments with combined face value of $209,000 that generated $200,000 cash proceeds and a third instrument with face value of $103,000 that generated $100,000 cash proceeds (collectively, the “April 2019 Notes”). During April 2019, HealthLynked also received $111,046 proceeds from the sale of common stock pursuant to the July 2016 Investment Agreement (the “April 2019 Stock Sale”). HealthLynked used the proceeds from the April 2019 Notes and the April 2019 Stock Sale in part to offset the cash consideration for the purchase of HCFM.

 

4

 

 

(2) The pro forma adjustments to goodwill and other intangible assets reflect the following:

 

Cash portion of purchase consideration   $ 500,000  
Contingent purchase consideration   $ 500,000  
Stock consideration - common stock portion   $ 397  
Stock consideration - additional paid-in capital stock portion   $ 971,825  
Eliminate equity of HCFM   $ (1,000 )
Eliminate retained earnings of HCFM   $ (381,076 )
Total   $ 1,590,146  

 

The aggregate value of the consideration paid by HealthLynked to complete the acquisition was allocated to the assets acquired and liabilities assumed from HCFM based upon their estimated fair values on the closing date of the acquisition. HealthLynked has not completed the detailed valuations necessary to estimate the fair value of the assets acquired and the liabilities assumed from HCFM and the related allocations of purchase price. Accordingly, such excess is presented as “Goodwill and other intangible assets” on the accompanying unaudited pro forma balance sheets.

 

(3) The pro forma adjustments to accounts payable and accrued expenses reflects the accrual of contingent purchase price consideration. Such payments may be earned by the selling shareholder as follows: (i) $100,000 on the first anniversary of the closing, of which 50% is subject to HCFM achieving revenue for the fiscal year ended December 31, 2019 of $3,100,000 and 50% is subject to HCFM achieving profit for the fiscal year ended December 31, 2019 of $550,000, (ii) $200,000 on the second anniversary of the closing, of which 50% is subject to HCFM achieving revenue for the fiscal year ended December 31, 2020 of $3,100,000 and 50% is subject to HCFM achieving profit for the fiscal year ended December 31, 2020 of $550,000, and (iii) $200,000 on the third anniversary of the closing, of which 50% is subject to HCFM achieving revenue for the fiscal year ended December 31, 2021 of $3,100,000 and 50% is subject to HCFM achieving profit for the fiscal year ended December 31, 2021 of $550,000.

 

(4) The pro forma adjustment to derivative financial instrument is to record the beneficial conversion feature of the April 2019 Notes. The April 2019 Notes each contained an embedded conversion feature (“ECF”) that qualified for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The inception date fair value of the ECFs for the April 2019 Notes totaled $331,830. Because the fair value of the ECF exceeded the net proceeds from the April 2019 Notes, a charge was recorded to “Financing cost” in the amount of $44,330 for the excess of the combined fair value of the ECF and 50,000 common shares issued with the April 2019 Notes over the net proceeds from the April 2019 Notes. Because the fair value of the ECFs exceeded the face values of the April 2019 Notes, the inception date discounts of the April 2019 Notes are equal to the face values of the notes and there is no pro forma impact in the “Convertible Notes Payable” line item on the pro forma balance sheet.

 

5

 

 

(5) The pro forma adjustment to common stock

 

Number of consideration shares issued at closing     3,968,254  
Par value per share   $ 0.0001  
Par value of consideration shares   $ 397  
Shares issued with April 2019 Notes   $ 5  
Shares issued in April 2019 Stock Sale   $ 57  
Total   $ 459  

 

(6) The pro forma adjustment to additional paid-in capital reflects the following:

 

Number of shares     3,968,254  
Closing share price on closing date (April 12, 2019)   $ 0.245  
Fair value of shares   $ 972,222  
Less: portion of stock consideration allocated to common stock   $ (397 )
Portion of stock consideration allocated to additional paid-in capital   $ 971,825  
Eliminate equity of HCFM   $ (1,000 )
Shares issued with April 2019 Notes   $ 12,495  
April 2019 Stock Sale   $ 110,989  
Total   $ 1,094,309  

 

(7) The pro forma adjustments to retained earnings is to eliminate the retained earnings of HCFM.

 

Adjustments to the pro forma combined statement of operations

 

(1) The pro forma adjustments to financing cost represent the excess of the fair value of the fair value of the ECF and 50,0000 common shares issued with the April 2019 Notes over the net proceeds from the April 2019 Notes.

 

(2) The pro forma adjustments to weighted average common shares reflects 50,000 shares issued with the April 2019 Notes and 567,953 issued in the April 2019 Stock Sale.

 

 

6